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Bed Bath & Beyond Inc BBBY

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Morningstar’s Analysis

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Bed Bath’s Rhetoric Likely the Canary in the Coal Mine for Slower Housing-Related Growth

Jaime M. Katz, CFA Senior Equity Analyst

Analyst Note

| Jaime M. Katz, CFA |

Facing external and self-inflicted headwinds, no-moat Bed Bath & Beyond printed second-quarter adjusted EPS of $0.04, well below the firm’s guidance for $0.48-$0.55. It also missed on sales, generating $1.98 billion versus its $2.04 billion-$2.08 billion forecast. While we aren’t shocked that the delta variant slowed foot traffic materially in August, we were disappointed there were also issues surrounding marketing spend; such missteps are already being remediated. However, in our opinion, there’s little hope in alleviating supply chain congestion any time soon, and we expect smaller retailers to be disproportionately impacted by poor access to capacity in the near term. We think this, along with inflationary issues, support Bed Bath’s restated 2021 outlook that now sees EPS of $0.70-$1.10, versus $1.40-$1.55 prior. Incorporating these concerns lowers our $23.50 fair value estimate by about $1, but we also plan to nudge 2022 sales and profits lower as we include ongoing (2022) supply chain headwinds. We view shares as modestly undervalued after falling around 25% post-print but caution investors that the return to sustained profit growth could be bumpy as global inventory throughput untangles.

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Company Profile

Business Description

Bed Bath & Beyond is a home furnishings retailer, operating around 1,000 stores in all 50 states, Puerto Rico, Canada, and Mexico. Stores carry an assortment of branded bed and bath accessories, kitchen textiles, and cooking supplies. In addition to 813 Bed Bath & Beyond stores, the company operates 132 Buy Buy Baby stores and 54 Harmon Face Values stores (health/beauty care). In an effort to refocus on its core businesses, the firm has divested the online retailer Personalizationmall.com, the One Kings Lane business and Christmas Tree Shops and That (gifts/housewares), Linen Holdings, and Cost Plus World Market.

Contact
650 Liberty Avenue
Union, NJ, 07083
T +1 908 688-0888
Sector Consumer Cyclical
Industry Specialty Retail
Most Recent Earnings Aug 31, 2021
Fiscal Year End Feb 27, 2022
Stock Type Cyclical
Employees 37,600

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